TMI Blog2022 (8) TMI 741X X X X Extracts X X X X X X X X Extracts X X X X ..... 9. The Revenue has raised following grounds of appeal:- 1. Whether in facts and circumstances of the case, the CIT(A) is correct in deleting the penalty imposed by the AO despite the fact that the assessee had claimed provision for interest expense in the profit and loss account which was not a bonafide claim? 2. Whether in facts and circumstances of the case, the CIT(A) is correct in observing that the assessee has not made any false claim in the return oven though provision for any expense is not an allowable expense and tantamount to illegal claim? 3. Whether in facts and circumstances of the case, the CIT(A) is correct in accepting the assessee's contention that the due disclosure in the accounts were made despite the fact that provision for any expense claimed is not an allowable expense? 4. Whether in facts and circumstances of the case, the CIT(A) is correct in deleting the penalty imposed by the AO despite the fact that the assessee s disclosure is not in conformity with the provisions as laid down in clause (B) to explanation 1 to section 271(1)(c) ? 5. Whether in facts and circumstances of the case, the CIT(A) is correct in observing that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of which were disclosed in the return of income. It is not the case of the AO that any false claim is made in the return. Mere disallowance of a claim/expenditure does not automatically qualify to be treated as furnishing of inaccurate particulars of income. In other words, mere fact that certain amounts claimed by the appellant have been disallowed and treated as income does not necessarily lead to the conclusion that the appellant is guilty or fraud or willful neglect. 4.2 Given these facts, that there was due disclosure in the accounts, it is to be seen whether the appellant can be charged for concealment of income or for furnishing inaccurate particulars thereof. It is a settled legal position that penalty proceedings and quantum proceedings are separate and distinct. It is equally a settled legal position that the explanation offered in the penalty proceedings has to be considered separately and independently in the matrix of requirements of the penal provisions. As per opinion expressed by the Hon ble Supreme Court in CIT vs. Anwar Ali, 76 ITR 696 findings in assessment order may constitute good evidence but it does not follow that penalty for concealment u/s 271(1)(c) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , fallacious, untenable etc. with reference to various contentions and submissions made by the assessee in the quantum appeal, but we den not think we will be contradicting ourselves when we hold that the conduct of the assessee was bonafide and the onus to show and establish bonafides has been discharged. The observations and adjectives used by us in the quantum appeal rejecting the submission of the assessee have been made after having advantage and benefit of the assessment order, appellate orders and hearing arguments of the counsel for the appellant assessee and the Revenue. Hindsight results in greater clarity and wisdom Test of bonafide has to be applied keeping in mind the position as it existed, when the return of income was filed. The Act, i.e. the Income Tax Act, is a complex legislation involving intricate and often debatable legal positions. The legal issue involved may relate to principles of accountancy Invariably, on questions of interpretation, the assesses do adopt a legal position which they perceived as most beneficial or suitable. This would not be construed as lack of bona fides as long as the legal position so adopted is not per se contrary to the language of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ibunal held as under: none of the appellate authority has held that the material facts relating to the computation of income have been suppressed by the assessee. Neither they have held that explanation given by the assessee has been false, nor is there a finding that the explanation remains unsubstantiated. There is no finding that the assessee has suppressed material relating to disallowance. Therefore, it cannot be said that the assessee is guilty of suppressing material facts relating to its income. There is also no finding that full material facts have not been disclosed by the assessee. It only mentions that the authorities have not accepted the explanations of the assessee for certain reasons, it is different matter that on account of difference of opinion, which is also possible amongst various authorities, the plea of the assessee has not been accepted Linder the deeming provisions, if the explanation is bonafide and material to the computation of total income, are disclosed by the assessee, Explanation 1 will not apply. 4.7 In my view, the appellant has furnished an explanation which it has substantiated as bonafide in so much as all the material facts were di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 13. The appellant also relied on the Judgement of High Court of Delhi in case of PCIT vs Granite Gate Properties Pvt. Ltd. [2019] 102 taxmann.com 236 (Delhi), where the Court has held that: That the expenses as claimed were otherwise eligible and allowed in the next assessment year, we would accept that the appellant assessee had shown that they had acted bona fidely. Thus, the appellant assessee should not have been burdened with penalty for concealment of income under section 271(1)(c) of the Act. The principle which emerges from the above is that penalty should not be levied where addition on account of claim which otherwise is allowable in next year and all details relating to these expenses were disclosed by assessee. In view of the above the penalty is deleted. 8. The Revenue has not brought any material to rebut the finding of Ld.CIT(A) that claim of the assessee was allowed in quantum appeal in AY 2102-13. Therefore, on such disallowance in the year under appeal, no penalty would be attracted. Moreover, the Ld.CIT(A) has given a finding that the claim of the assessee was bonafide. Under these facts, we do not see any reason to interfere into the finding of Ld ..... X X X X Extracts X X X X X X X X Extracts X X X X
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